US, EU stiffen sanctions on Moscow over Ukraine

The United States and Europe strengthened sanctions on Moscow over Ukraine Wednesday, with President Barack Obama taking his first direct swipes in the finance, military and energy sectors of the Russian economy.

The American package of sanctions packed the most punch and drew an angry threat of serious retaliation from Moscow, further escalating the worst standoff since the Kremlin and the West since the Cold War.

Europe and the United States acted after fighting between the Western-backed Kiev government and pro-Russian separatists took another dangerous turn, with 55 civilians killed since the weekend alone.

"Given its continued provocations in Ukraine... I have approved a new set of sanctions on some of Russia's largest companies and financial institutions," Obama said at the White House.

The president said he had repeatedly told Russian President Vladimir Putin to halt the flow of weapons across the eastern Ukraine border and to agree to genuine border monitoring measures.

"Russia has failed to take any of the steps that I mentioned," Obama said.

"In fact, Russia's support for the separatists and violations of Ukraine's sovereignty have continued."

Putin warned the biting sanctions will boomerang and hit back at US national interests, will inflicting "very serious damage" on an already tattered US-Russia relationship.

"I am convinced that this will harm the national long-term interests of the American state, the American people," Putin told reporters in Brasilia, according to the ITAR TASS state news agency.

Targeted measuresWashington's moves will have the effect of barring from US capital markets two major Russian financial institutions, Gazprombank and VEB, and two giant Russian energy firms, OA Novatek and Rosneft.

The US Treasury also said that eight Russian arms firms that produce small armaments, mortar shells and tanks would also face direct sanctions.

The US list of sanctions included measures against the self-styled breakaway Donetsk People's Republic and the Lugansk People's Republic in eastern Ukraine.

Personal sanctions were imposed against Sergei Besesda, a key figure in the FSB domestic intelligence service, and Oleg Savelyev, Russia's minister responsible for the annexed Ukrainian region of Crimea.

European leaders meeting in Brussels signaled they were bolstering their own sanctions against Russia, following intensive conversations with the United States.

The moves will see the EU's European Investment Bank (EIB) and European Bank of Reconstruction and Development (EBRD), halt finance for projects in Russia, a diplomatic source told AFP.

False PretextRussia immediately threatened retaliation against the United States.

Deputy Foreign Minister Sergei Ryabkov said the US moves "under a far-fetched, false pretext cannot be called anything other than outrageous and fully unacceptable."

While the US measures target some of Russia's best known firms, they do not seek to wound entire sectors of the economy -- as had been threatened previously by the United States.

They also would not ban Russian firms from doing business with American individuals and companies or sequestrate assets under US jurisdiction.

But the approach leaves fresh options for US policymakers if the situation further deteriorates, officials said.

Europe's more tempered measures come amid significant opposition to deeper punishments for Moscow in the European business community -- and differences in nuance on the issue between the EU and the United States.

US officials, however, said that the combined action by the transatlantic allies would impose a significant price on the Russian economy.

One official said that he could not rule out the possibility of the new sanctions tipping Russia's economy into a recession.

Washington had previously imposed financial and travel restrictions against the leadership of some key Russian firms and enterprises and what it said were "cronies" around Putin, as well as key leaders of the separatist movement.

Revived truce effortsMore than three months of fighting in Ukraine has already claimed more than 600 lives.

Ukrainian President Petro Poroshenko's attempts to set up a Skype videoconference on Tuesday with the separatists -- a conciliatory step previously agreed with Germany Chancellor Angela Merkel -- were rebuffed by the rebel command.

But senior rebel leaders said they had agreed to hold new European-mediated consultations with Kiev representatives by the weekend.

German Chancellor Angela Merkel earlier blamed Russia -- a country that she had spent her first years in office trying to coax into taking a cooperative approach with the West -- for the collapse of the peace talks.